Do Pharmaceutical Prices Respond to Insurance?

Despite the importance of patient insurance in the market for prescription pharmaceuticals, little is known about the impact of insurance on the pricing behavior of pharmaceutical firms. This paper examines the link between insurance and pricing using a unique policy experiment from Germany. Starting in 1989, a maximum reimbursement for a given medicine replaced a flat prescription fee. This change in insurance reimbursement exposes the patient to the price of a prescribed product. Using a product level panel dataset covering several therapeutic categories before and after the change in insurance reimbursement, I find that producers significantly decrease prices after the change in insurance. Price declines are most pronounced for brand name products. Moreover, branded products that face more generic competitors reduce prices more.

What Explains Skill Upgrading in Less Developed Countries?

Although many developing countries have experienced growing income inequality and an increase in the relative demand for skilled workers during the 1980s, the sources of this trend remain a puzzle. This paper examines whether investment and adoption of skill-biased technology have contributed to within-industry skill upgrading using plant-level data from Chile. Using semiparametric and parametric approaches, I investigate whether plant-level measures of capital and investment, the use of imported materials, foreign technical assistance, and patented technology affect the relative demand for skilled workers. I find positive relationship between these measures and skill upgrading. Capital deepening and the adoption of skill biased technology therefore might contribute to the increased relative demand for skilled workers within industries.

Does Globalization Increase Child Labor? Evidence from Vietnam

This paper considers the impact of liberalized trade policy on child labor in a developing country. While trade liberalization entails an increase in the relative price of the exported product, trade theory provides ambiguous predictions on how this price change affects the incidence of child labor. In this paper, we exploit regional and intertemporal variation in the real price of rice to examine the relationship between price movements of a primary export and the economic activities of children. Using a panel of Vietnamese households, we find that reductions in child labor are increasing with rice prices. Declines in child labor are largest for girls of secondary school age, and we find a corresponding increase in school attendance for this group. Overall, rice price increases can account for almost half of the decline in child labor that occurs in Vietnam in the 1990s. Greater market integration, at least in this case, appears to be associated with less child labor. Our results suggest that the use of trade sanctions on exports from developing countries to eradicate child labor is unlikely to yield the desired outcome.

International Trade and Child Labor: Cross-Country Evidence

We explore the relationship between greater exposure to trade (as measured by openness) and child labor in a cross country setting. Our methodology accounts for the fact that trade flows are endogenous to child labor (and labor standards more generally) by examining the relationship between child labor and variation in trade based on geography. We find that countries that trade more have less child labor. At the cross-country means, the data suggest an openness elasticity of child labor of -0.7. For low-income countries, the elasticity of child labor with respect to trade with high income countries is -0.9. However, these relationships appear to be largely attributable to the positive association between trade and income. When we control for the endogeneity of trade and for cross-country income differences, the openness elasticity of child labor at cross-country means is much smaller (-0.1) and statistically insignificant. We consistently find a negative but statistically insignificant association between openness and child labor conditional on cross-country income differences when we split the sample into different country groups, consider only trade between high and low income countries, or focus on exports of unskilled-labor intensive products from low income countries. Thus, the cross-country data do not substantiate assertions that trade per se plays a significant role in perpetuating the high levels of child labor that pervade low-income countries.

Distributional Effects of Globalization in Developing Countries

We discuss recent empirical research on how globalization has affected income inequality in developing countries. We begin with a discussion of conceptual issues regarding the measurement of globalization and inequality. Next, we present empirical evidence on the evolution of globalization and inequality in several developing countries during the 1980s and 1990s. We then examine the channels through which globalization may have affected inequality discussing theory and evidence in parellel. We conclude with directions for future research.

Product market integration and household labor supply in a poor economy: evidence from Vietnam

This report considers how product market integration in a country's primary agricultural export alters the economic activities of men and women in a poor economy. Between 1993 and 1997, Vietnam relaxed its rice export quota and freed internal restrictions on the trade of rice across regions. These reforms contributed to an almost 30 percent increase in the real price of rice. Using a panel of rural Vietnamese communities that spans the period of policy change,the authors relate the regional and intertemporal variation in the price of rice to changes in the economic activities of children, young adults, and adults by gender. They find that higher rice prices are associated with lower participation in wage work by boys, girls, and young adults, and lower participation in household production by adults. Moreover, higher rice prices are associated with less time devoted to household production for all age groups and adults devoting more hours to wage work. Finally, with the exception of children, labor market responses to changes in rice prices mostly do not differ statistically for males and females.Environmental Economics&Policies,Labor Policies,Economic Theory&Research,Health Economics&Finance,Markets and Market Access,Environmental Economics&Policies,Health Economics&Finance,Economic Theory&Research,Access to Markets,Markets and Market Access

Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries

We review the empirical evidence on the relationship between Trade Liberalization, Inequality, and Poverty based on the analysis of micro data from several developing countries that underwent significant trade reforms in recent years. Despite many measurement and identification difficulties, and despite conflicting evidence on some issues, empirical work based on country case studies' has established certain patterns that seem common across countries and trade liberalization episodes, and may hence be informative as to how developing countries adjust to trade reform.

The Response of the Informal Sector to Trade Liberalization

This paper studies the relationship between trade liberalization and informality. It is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector, defined as the sector that does not comply with labor market legislation. Using data from two countries that experienced large trade barrier reductions in the 1980's and 1990's, Brazil and Colombia, we examine the response of the informal sector to liberalization. In Brazil, we find no evidence of a relationship between trade policy and informality. In Colombia, we do find evidence of such a relationship, but only for the period preceding a major labor market reform that increased the flexibility of the Colombian labor market. These results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market.

Trade Reforms and Wage Inequiality in Colombia

We investigate the effects of the drastic tariff reductions of the 1980s and 1990s in Colombia on the wage distribution. We identify three main channels through which the wage distribution was affected: increasing returns to college education, changes in industry wages that hurt sectors with initially lower wages and a higher fraction of unskilled workers, and shifts of the labor force towards the informal sector that typically pays lower wages and offers no benefits. Our results suggest that trade policy played a role in each of the above cases. The increase in the skill premium was primarily driven by skilled-biased technological change; however, our evidence suggests, that this change may have been in part motivated by the tariff reductions and the increased foreign competition to which the trade reform exposed domestic producers. With respect to industry wages, we find that wage premiums decreased by more in sectors that experienced larger tariff cuts. Finally, we find some evidence that the increase in the size of the informal sector is related to increased foreign competition sectors with larger tariff cuts and more trade exposure, as measured by the size their imports, experience a greater increase in informality, though this effect is concentrated in the years prior to the labor market reform. Nevertheless, increasing returns to education, and changes in industry premiums and informality alone cannot fully explain the increase in wage inequality we observe over this period. This suggests that overall the effect of the trade reforms on the wage distribution may have been small.